Retail sales in May rose less than expected, raising questions about the strength of the consumer. S&P 500 futures rose slightly in early Tuesday stock market action following Monday's record high, as Wall Street weighed the implications for the Fed rate-cut outlook and corporate earnings.
The retail sales data comes as numerous retailers have announced price cuts over the past month, including Target, Amazon and Walmart. Fast-food chains have also announced new deals, including McDonald's $5 value meal. Meanwhile, the May consumer price index revealed a 0.5% in new vehicle prices, the biggest drop since April 2020, at the start of the Covid shock.
Consumers could be turning price sensitive in part because borrowing via credit card has become even pricier as the Fed keeps interest rates higher for longer.
Retail Sales Hits And Misses
Overall retail sales rose 0.1% on the month, below 0.3% forecasts. Sales for April were revised lower to a -0.2% monthly change from the initial flat reading.
Excluding autos, sales dipped 0.1% in May, well below estimates for a 0.3% gain. Nonauto sales also fell 0.1% in April, down from the +0.2% initial report.
Sales edged up just 0.1% excluding both autos and gas, below +0.3% forecasts.
Overall sales in May rose 2.3% from a year-ago, slowing from April's 2.7% pace that was revised down from 3%.
Retail Sales Details
Areas of weakness included sales at food services and drinking places (-0.4%), furniture stores (-1.1%), grocery stores (-0.4%) and department stores (unchanged).
Fed Rate-Cut Odds
After the retail sales report, markets were pricing in 68% odds of a Fed rate cut at the Sept. 18 meeting, up from 61.5% ahead of the data. Wall Street now sees 69% odds of two quarter-point rate cuts this year, up from 62%.
S&P 500
The S&P 500 added 0.2% in early stock market action, following the retail sales data. On Monday, the S&P 500 rose 0.8% to notch its 30th closing high of the year.
The 10-year Treasury yield slipped 2 basis points to 4.25%.
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